It is one of the most popular and successful social networks, but investors can’t buy Instagram stock even if they want to because Facebook beat them to it. It was April 2012 that Facebook founder Mark Zuckerberg bought Instagram for $1 billion and it has turned out to be one of his best purchases ever made.
The problem with investing in social media sites is that there are so many of them that it is difficult to guess which ones will stand the test of time and actually make money. Twitter has been a failure along with Periscope which it owns, Vine has just shut down, and Meerkat has also shut down as well. Facebook is the big winner and investors are now clamoring to buy Snapchat stock at its future IPO with the belief that it will also be a winner. Instagram has quietly become a very popular and profitable photo sharing site but investors will have to buy Facebook stock (FB) if they want to get a piece of it.
How Popular Is Instagram?
In Facebooks earnings release on 11/2/2016, Zuckerberg said that Instagram has more than 500 million monthly active users as well as more than 300 million daily active users. The platform is now built out enough and has enough users to let it enter the third phase of the plan: allow businesses to reach more potential customers by opening up tools within Instagram. What that means is that its time to really turn on the ads and start making money!
Instagram Stories (a blatant Snapchat ripoff) was successfully launched in August and it reportedly now has over 100 million active users. The company has also upgraded the Explore Tab within Instagram to include more videos and stories and that feature is also getting 100 million actives every day. All in all, Instagram is doing very well and is now just starting to hit full stride in terms of monetizing the site.
But Instagram Is Just A Small Part Of FaceBook
As mentioned above, the only option for anyone wanting to buy Instagram stock because they like the business is to buy its parent company Facebook. But Facebook is much, much bigger than Instagram and so if you buy FB stock you are getting the whole company which is comprised of many things. Facebook just warned that even though it is still growing, its advertising revenue may level off in 2017 because many of its platforms (WhatsApp, Messenger, Facebook) are already running a lot of ads. There are only so many users in a finite world so growth has to eventually slow down and there are only so many ads you can show them, for a variety of reasons.
This means that however well Instagram is doing individually, investors value FB stock as the sum of the parts and the other parts may begin to see slower growth starting in 2017. So, if you decide to buy the stock, you aren’t getting anywhere near a pure play on Instagram.